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What does a CPI drop mean for property investment?

The Reserve Bank of New Zealand (RBNZ) is going to meet to discuss their cash rate for the first time in 2015 during February, and there are many factors that will influence the board's decision. One of these is the Consumer Price Index (CPI), which decreased by 0.2 per cent over the December quarter.

Making a smart property investment means getting the right advice and also checking all the factors that may influence your purchasing power. With this in mind, let's take a look at what others are saying about the CPI drop.

Calls for a cut coming through

The New Zealand Manufacturers and Exporters Association (NZMEA) thinks that due to the CPI decrease, the RBNZ cash rate could be cut. NZMEA Chief Executive John Walley said in a January 21 press release that lower interest rates would move our country more in line with the rest of the world.

"Much of the world is facing issues with persistent low inflation – a risk that needs to be considered in New Zealand around monetary policy alignment," he said.

CPI down doesn't mean disaster

While the consumer price index deflating a little seems gloomy, if you look closer you'll see some positive growth – especially if you have an eye for property investment. The price of new houses went up 1.7 per cent during this quarter, which excludes land-only sales.

This means that by seeking the appropriate property investment advice, you may be able to secure a piece of real estate that quickly increases in value, setting you right on down the path to financial independence. And don't panic about the CPI dropping! As Westpac chief economist Dominick Stephens told the NZ Herald on January 22, a small drop doesn't mean much for the wider CPI trends.